or retailers the world over, the cup is full.
Distribution is at a crossroads, with crucial choices ahead:
which direction should they choose?

“Inventories have attained levels never seen before.
Richemont has announced that they are buying back
218 million euros’ worth of watches to clean out the
market, including a large number of Cartier watches,
but that still is not enough; stocks are still too high.”René Weber, Vontobel, Europa Star Arcade, November 2016

“The reduction in profit margins for distributors was initiated
four or five years ago,” Gérard Gouten, a Swiss market
veteran, explains to us. “Today, since they’ve moved upmarket,
distributors are located on the best avenues in town.
Rents are huge, the salaries of qualified sales staff are high,
and they work longer hours with the increase in night-time
opening. And then there’s the issue of discounting, a practice
which has become generalised and which customers are
now demanding from the outset. And that’s not to mention
the direct competition war that the brands are waging with
their own boutiques.”

But the current crisis has also had the effect of raising margins
slightly, and brands are adapting their policies once again. For
example, Cartier, which had reduced its margins to 35%, is cautiously
raising them to an average of 38% – while not forgetting
to mop up stocks and take back more unsold items than
before. Whatever the case, the independent
watchmakers are still offering more appreciable
margins to retailers, up to 50%, resulting
in an average margin of around 40%.
But what is left of these margins after all
the expenses are taken into account?

-10%, the minimum discount

-10% for the tour operator who brings
in the customers

-2.5% for credit card charges

-5% for contractual communication

This adds up to 27.5%, excluding rent, salaries, running
costs, maintenance, taxes and various charges.

Moreover, retailers have to eliminate static inventory,
improve product turnover – because without
sell-out, there’s no sell-in – and, if necessary, activate
the guarantee and sell the watches at cut prices. And
that is not even to mention the new, cut-throat competition
from e-commerce.

Some of the people we spoke to are “convinced we’re
heading towards an uberisation of the watch distribution
sector” as a result of the “takeover by e-commerce”.
During our discussions, one model cropped
up again and again: that of turning retailers into
“gallery owners”.